Joint Ventures a Tool for Growth During an Economic Downturn
Joint Ventures
A tool for growth during an economic downturn
2009
© 2009 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated.
02 Joint Ventures
Our focus on joint ventures
Life is tough for businesses with expansion plans. The high leverage, liquidity and low funding costs that fueled growth may have stopped, but activist investors are still demanding increased shareholder value. Meanwhile, investors such as private equity and sovereign wealth funds (SWFs) are eager to take advantage of falling asset prices. Do joint ventures1 offer an opportunity for expansion in these tough times? KPMG believes that they can. Joint venture activity has been increasing over the past few years and shows every sign of continuing on an upswing, potentially a big one. We believe that the downturn and lack of credit will be a primary driver for this. Access to specific capabilities and intellectual property, getting closer to the customer and winning contracts in new markets are other key drivers. We also think that SWFs and private equity can play an important role as potential partners and sources of finance. KPMG has been watching this rise in joint venture activity with keen interest. Following the production of in- depth case studies into several large multinational alliances, KPMG commissioned the Globalization and Strategy Research Center at IESE Business School in Spain to explore joint ventures in greater depth. The IESE were asked to conduct an extended study – a thought leadership project surveying key factors behind joint ventures. IESE surveyed over 100 CEOs, CFOs and
1
senior executives across major industry sectors throughout the world about their joint venture experiences during the last five years. (See p15 for more details.) The results reveal some fascinating insights, including key factors that contribute to successful joint ventures,
A tool for growth during an economic downturn
2009
© 2009 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated.
02 Joint Ventures
Our focus on joint ventures
Life is tough for businesses with expansion plans. The high leverage, liquidity and low funding costs that fueled growth may have stopped, but activist investors are still demanding increased shareholder value. Meanwhile, investors such as private equity and sovereign wealth funds (SWFs) are eager to take advantage of falling asset prices. Do joint ventures1 offer an opportunity for expansion in these tough times? KPMG believes that they can. Joint venture activity has been increasing over the past few years and shows every sign of continuing on an upswing, potentially a big one. We believe that the downturn and lack of credit will be a primary driver for this. Access to specific capabilities and intellectual property, getting closer to the customer and winning contracts in new markets are other key drivers. We also think that SWFs and private equity can play an important role as potential partners and sources of finance. KPMG has been watching this rise in joint venture activity with keen interest. Following the production of in- depth case studies into several large multinational alliances, KPMG commissioned the Globalization and Strategy Research Center at IESE Business School in Spain to explore joint ventures in greater depth. The IESE were asked to conduct an extended study – a thought leadership project surveying key factors behind joint ventures. IESE surveyed over 100 CEOs, CFOs and
1
senior executives across major industry sectors throughout the world about their joint venture experiences during the last five years. (See p15 for more details.) The results reveal some fascinating insights, including key factors that contribute to successful joint ventures,